This is the first of an ongoing series of articles dedicated to one of the most critical corporate processes – Pricing – and how pricing needs to be an essential element of any Product Information Management (PIM) strategy.  Future articles will cover Pricing Research and Analysis topics, and other processes dependent upon or associated pricing and its management.

 For years now, manufacturers have used rebate, in one form or another, as an incentive to drive sales.  The simplest form of rebate – rebate coupons – has been prevalent for more than a century as the primary incentive to entice the consumer to try or buy a manufacturer’s products.  Coupons now often take the form of a discount on the point of sale price.  But rebates are a little more complex; they are generally offered by the manufacturer as a refund discount payment, after a transaction has been made.

Rebates can take many forms and are used for many reasons, all of which can make the tracking, maintenance, and subsequent payout a daunting challenge in terms of resources, processes and cost.  Furthermore, if the program is not managed, monitored and reported-on well, it can result in damaging adjustments being required to financial reports.

In the automotive manufacturing sector, rebates are tied to one specific goal –   reducing vehicle inventories by increasing vehicle sales.  While the management of these rebates can be cumbersome, it pales in comparison to the complexity of Rebate Management in either the automotive aftermarket or consumer packaged goods.

For instance, the sell chain of the automotive aftermarket in North America is complex, dealing concurrently with major retailers, warehouse distributors, program groups, major service centers, mom-and-pop installers, service stations, mass merchandisers and, in some cases, end consumers.

Rebate programs in the automotive aftermarket tend to be multi-tiered – some with coupon programs associated with certain products and directed at the consumer of do-it-yourself parts; while additional rebate programs targeted at service shops, and the distribution chain run as parallel programs, each with a different type of incentive, but all with the same goal – to sell more of a manufacturer’s products.

While the end consumer may simply get a rebate on the purchase of one or two items, the distribution chain on the other hand, is induced with different, more complex programs – generally based on sales volume, but also amalgamated with other types of programs which typically include product mix objectives, and other such sales achievement combinations.

Rebate Management for the distributor, generally relates to consolidating point-of-sale information and tracking it against the manufacturer’s deal to make a rebate claim. For many manufacturers, however, the scale of tracking multiple rebate deals against multiple products, customers and distribution types has become a time and resource-consuming nightmare.  Industry statistics suggest that rebate processing personnel spend more than 40 percent of their time simply pulling together the data, and another 40 percent of their time, analyzing and validating it against terms and conditions.

And all of this generally occurs when the rebate claim is made by the retailer or distributor, causing a concentration of effort in order to process the claim in a timely manner, and not cause disruptions with Accounts Receivable as distributors wait for the rebate cheque or credit.

No wonder, given the complexity of the process, that many manufacturers outsource rebate management and processing today.  But outsourcing doesn’t necessarily speed up the process, it simply moves the process out to arm’s length, and generally at the cost of many hundreds of thousands, if not millions of dollars.

The process behind rebate monitoring and management is quite simple in theory, but complex in practice.

The first step is determining, through a pricing and yield process, what are the viable thresholds for rebate stages.  This is typically done in the marketing department, where rebate programs are first developed.

The next step is recording the rebate terms – that is, the specific discounts, products and thresholds that form the rebate program or ‘deal’ with a customer.  It is at this point things become more complex.

For reporting purposes and Sarbanes-Oxley (SOX) requirements, a robust rebate management process is necessary in order to truly track net revenue and avoid having to undertake a disastrous financial restatement, or even ‘crystal-ball’ internal adjustment estimates for quarterly reporting.  But if SOX has been the driver to get a better grip on rebate management, consider the following statistics, which, on their own, make a very strong business case for investing in improving this process.

Rebate Reporting Errors

For manufacturers that sell through distribution channels, a recent study found that more than 20% of all point-of-sale data reported by channel partners contains inaccuracies and missing or incorrectly completed fields. This leaves manufacturers susceptible to financial misstatements and poor strategic decision-making.


Partner claims risks

Industry research shows that while companies spend up to 20 percent of their total revenue on partner incentive programs, between 10 and 15 percent of partner claims against these programs can prove to be invalid. For a $1 billion company, this can translate into between $20 and $30 million per year paid out for invalid or otherwise erroneous claims.  This is no small change in any organization.

PIM and Pricing Technology –

Using the 4 Pillars to Leverage a Robust Rebate Management Process

 Using a comprehensive Product Information Management system such as Pricedex’s AutoPIM Proä, a manufacturer can establish a robust Rebate Management process in-house.  This industry-leading solution incorporates all the aspects of Part and Product Management with Pricing Management features including ‘Deal Management’ (the place where contract and rebate terms are stored by product and customer type).

Establishing the Rebate Management System

The system can be interfaced with a manufacturer’s invoicing system, and track a customer’s purchases and credits by line item.  The system, using its Deal Management profiles, can report the accrual of rebate liability against its sales data and provide a consolidated, pro-forma net sales report.  Given that it also records inventory returns from the line item credit notes, this number is highly reliable.

Processing and Analyzing Claims

A top-notch PIM system; such as the Auto PIM Pro system should provide the option of electronically loading a customer claim, or providing the customer a self-service portal by which to load required sales data to properly process the rebate claim.  This one step alone reduces hundreds of hours of data gathering and processing, and provides an audit trail by which to support and justify the rebate claim.  The line item data submitted by the customer is then cross-referenced and matched in the system, validating the claim.  Exceptions (data that doesn’t cross-reference) are summarized for manual analysis and validation or defensible disallowance of rebate claims.  Once validated, a Payment Notification is generated by the system and sent to the appropriate financial authority for processing.


Rebate Management is an inherently costly process and without technology such as the AutoPIM Proä solution, it is also time consuming, inherently error-prone and also subject to abuse.  By implementing a robust Rebate Management system, companies can expect to cut significant costs from Marketing Support programs and financial analysis and audit processes, while increasing revenue through a more effective rebate process.

This all serves to keep customers happy by making it easier for them to do business with a company, and meets corporate objectives by optimizing the intent of rebate strategies through continuous monitoring and management, and informed decision-making due to new visibility into all aspects of the rebate process.